Capital Gains Tax in Canada: What You Owe When You Sell

Capital Gains Tax in Canada: What You Owe When You Sell

If you sold stocks, crypto, investment property, or other assets at a profit in Canada, you likely have a capital gain. And capital gains are taxable.

Here’s how it works, what changed recently, and how to minimize the tax hit legally.

How Capital Gains Are Taxed

Canada doesn’t have a separate “capital gains tax rate.” Instead, a portion of your gain is added to your regular income and taxed at your marginal rate.

For individuals in 2026:

• First $250,000 of capital gains: 50% inclusion rate (half the gain is taxable)
• Capital gains above $250,000: 66.67% inclusion rate (two-thirds is taxable)

For corporations and trusts, the 66.67% rate applies to all capital gains from dollar one.

Example

You sell shares for a $100,000 profit. At 50% inclusion, $50,000 gets added to your taxable income. If your marginal rate is 30%, you pay $15,000 in tax on that gain.

What Counts as a Capital Gain?

• Selling stocks, ETFs, or mutual funds at a profit
• Selling real estate (that isn’t your principal residence)
• Selling cryptocurrency
• Selling a business or business assets
• Deemed dispositions (e.g., when leaving Canada or transferring assets)

What Doesn’t Count

• Principal residence: Gains on your primary home are generally exempt (but you must designate and report it)
• TFSA/RRSP/FHSA: Gains inside registered accounts are sheltered from tax
• Gifts between spouses: Generally transfer at adjusted cost base (no immediate gain)

Adjusted Cost Base (ACB): The Key Number

Your capital gain equals the sale price minus your Adjusted Cost Base (ACB). The ACB is what you paid for the asset, including purchase commissions and certain costs.

For stocks you bought in multiple lots, your ACB is the weighted average of all purchases. Tracking this accurately is critical, especially for crypto where you may have dozens of transactions.

Reporting Capital Gains

Capital gains and losses are reported on Schedule 3 of your tax return. Your brokerage may issue a T5008 slip, but the ACB calculation is your responsibility.

Capital Losses: Your Tax Shield

If you sold at a loss, you have a capital loss. Capital losses can offset capital gains in the same year, or be carried back 3 years or forward indefinitely.

This creates a planning opportunity: if you have gains this year, consider selling underperforming investments to generate losses that offset the tax.

The Principal Residence Exemption

Selling your home? The gain is usually tax-free under the Principal Residence Exemption. But you must report the sale on your tax return (Schedule 3) and designate the property. Failing to report can result in penalties even if no tax is owed.

5 Ways to Reduce Capital Gains Tax

1. Use registered accounts. Buy growth investments inside TFSA where gains are permanently tax-free.
2. Harvest losses. Sell losing positions to offset gains.
3. Time your sales. If possible, spread large dispositions across tax years to stay under the $250K inclusion threshold.
4. Donate appreciated securities. Donating publicly traded shares to a registered charity eliminates the capital gains tax entirely.
5. Track your ACB carefully. Accurate cost tracking prevents overpaying.

Want help calculating your capital gains or planning your next move? Book a free consultation with FinGems.